forecast. the trade affects the start to ripple through earnings. king dollar. the yuan hits a one year low. the fallout from the dollar rally. car trouble. more than 40 people had to the commerce department for a public hearing on auto tariffs. the eu stands by to retaliate. welcome to "bloomberg daybreak." perfect timing. zeroing in on that. >> my favorite part of the quarter. it is a beat on the bottom line. eps at $.90. the estimates was $.74. slightly down from last quarter. they were $450 billion or so, coming in at $439 billion.

a bead on the bottom line. net inflows in the second quarter. this is a juggernaut. alix: that is still serious cash. throughbe parsing for where the opportunities may be. the s&p is down. seems to be the story of the morning, picking up speed. having ripple effects. the first is the two-year yield at the highest level since 2008. 26 basis points, to tens, a little bit steeper. crude getting hit, off 1%. it is really copper, a six-week slide. it is dollar story, china-concern story. our time now is for bloomberg's

first pick. we are joined by bloomberg's opinion columnist. alcoa was front and center. here is roy harvey on the call yesterday. >> we are reducing our 2018 outlook to reflect recent market on aluminumffs imports come increased energy costs, and operational impact. alix: is this the beginning? is not surprising alcoa is seeing the impact of tariffs. they are the front line here. it will be more interesting to hear what industrial companies have to say when we get those numbers this weekend early next week. that is the . next line. it is looking for some products currently made in china. it is valuing the economics.

you look at alcoa trading over the last 12 hours, lower, then back to where we are started. i wonder how much this is priced in now. >> i think a lot was priced in. a lot of folks see this as something that can be handled. on someheard this conference calls. it is this something where people say it is bad and a zero-sum game? it will be interesting to see who benefits from this, what countries benefit, what states in the united states may benefit from it. we are going to talk about the auto industry coming up.

about how those jobs shifted from different parts of the country to the southeast. lots of different companies will have different answers. alix: aluminum should have been good for alcoa. they get a chunk of production from canada. that comes with the 10% tariff. theory, that should do well when aluminum prices get higher. i think that will be the differentiation between those and where you source production. jason: everyone is talking about this. we were talking before the show. every single story has some trade element, even if we go back to blackstone. steve schwarzman will be act about -- asked about this in the conference call. the field to see earnings. we have seen companies ramp up production on some of those mills that have been idle. it will be interesting to see how they account for for some of the decline from overseas.

, laterspeaking of autos today in washington, a huge meeting at the commerce department. lots of different people, executives. one of the organizations weighing in is the national automobile dealers association, not surprising they would have an opinion. alix: shocker. jason: not shocking what they have to say, a 25% terror for apply to all imports would hurt auto manufacturers come in dealers, consumers, and the economy as a whole. and the hardest hit would be our customers. not surprising. todayyou expect to hear -- do you expect to hear today? >> a significant amount of pushback. the only people that like this are the unions, and they think better trade relations are a good thing. they would like them on better terms than what we have currently. as you were saying, what we are ising from this battle

supply chains laid bare in the level of complexity. companies producing parts in one country, the products and another, and potentially sell it in a completely different country. one thing that does not get talked about a lot, some of these countries, you talk about europe, they don't really want american cars. our cars don't have necessarily the best reputation when you -- toe it to jump in japanese or european cars. would getting rid of all the letters altogether be better for american manufactures? i'm not so sure. jason: how is this playing through the markets? >> you think about how strong the market has been for automakers here. someone characterize this as basically a bull market as far as auto sales go. employment growth and wage growth has been going up, so it is curious what they are trying

to protect here, but the impacts will be more severe if he goes through with this. just compared to steel and ofminum, a combined total $60 billion in imports. compare that to $300 billion if you take it passenger vehicles on the parts that go into them, so the impact potentially could be broader. the pain being felt in the industry is not comparable to what we saw in steel and other manufacturing industries. alix: you know what will make you feel good? our third story. this is how we will illustrate it. the dollar-yuan is that it one-month high. the pboc set the reference rate weaker at 6.7, the first time since august. 6.8, am hearing calls for pointing to a weakening china currency and stronger dollar. we see the effects we

saw a year ago, or is it more contained? you learned today is there is no line in the sand. people have taken china's language around not using the currency as a weapon and they would keep it at a certain level. instead, you are seeing a willingness to let it decline. the other thing i wanted to point out is the gap between the onshore and offshore rate. foreign institutions are significantly more bearish on the currency and willing to be more speculative than mainland banks. in the past, that was where the pboc was willing to intervene and make it prohibitively expensive to bet against the country. are investors willing to have the currency used in the trade war? >> if you look at this steepness of the depreciation and where it started. it started around march.

that was when a lot of the trade war ramped up. it has been a persistent decline. weaponize in it or not, they are clearly not stepping in. the chatter is we are talking 6.8. i heard someone talking about seven. this is where people are thinking. they are making bets the pboc is not going to step in, that this , therer way of combating are salvos in the trade war. if that is the case, get ready. alix: not to mention that china was slowing with to begin with. thank you both very much. you can find all of those charts on much more at gtv your terminal. check it out. i want to focus in on blackstone , beating estimates, $.90 for

earnings. we will take a look at all the color throughout the earnings report. jason: i'm getting messages already questioning that number. it will be interesting what they have to say. alix: jason is the pe guy. he wrote the books on pe. coming up, taking a look at what it means for earnings. ?re you getting rewarded are you getting overly punished for mrs.? we will break that down. this is bloomberg. ♪

>> this is "bloomberg daybreak: americas."

this is your bloomberg business flash. investors are worried ebay is with a momentum lackluster sales forecast for the third quarter and lowering its sales forecast for the year. is trying to find its place in the shadow of amazon. s.a.p.'s bet on the cloud business is paying off. it raised its outlook for this year and next, citing accelerating cloud sales. the company said new bookings rose faster in the second quarter than first. tor was unable raise prices enough to make for the setback from a result strike. that is your bloomberg business flash. alix: sorry. my bad.

i had a clipboard that just fell. jason: we are talking about misses, earnings mostly. an interesting chart we showed going into the break. i want to talk about this. investors arews punishing companies more for missing estimates, even more than the first quarter. what is happening? >> investors are getting fed up with companies that don't keep up. ,ou are seeing it on the miss but also when you see a combination of misses on the top line. on the flipside, much stronger gains for companies that are beating, much more so than last quarter. last quarter you had a lot of selling into these beats. this corridor, you're seeing much stronger gains in these equities has these companies come in above expectation.

alix: from the commentary you are hearing so far on conference calls and whatnot and the questions being asked by the sell side and the buy side, optimism, caution? the number one word you are hearing is sustainability, or some variation of that word. for right now, we have only had 55 companies report so far. 52 of those have beaten earnings. can you beat,uch but are you going to continue beating in the third and fourth quarter, so investors are looking at sustainability going forward and want to know how these macro things will play into it. ties into the alcoa conference call. here is the ceo. >> we are reducing our 2018 outlook to reflect recent market prices, tariffs, increased

energy costs, and operational impacts. alix: you could say the earnings , maybe not amisses ton of upgrades going into the quarter, but earning estimates for 2019 and 2020, the can't be any visibility for that. >> if you look at analysts expectations and the pe ratios on the s&p and nasdaq 100, they are pretty stable. they have not gone down, despite the handwringing regarding geopolitics, trade, and trump. you are still 17 times earnings on the s&p, which is lower than where some people thought it should be, but it has held up since march. you're seeing a lot of analysts defend their positions. you saw this when netflix this is. missed.

make sure investors understand their view, and there is more willingness to defend that position this quarter. alix: interesting. margins ands to input costs, they are dealing with overall higher commodity prices. a strongeraling with dollar, rising wages, rising costs from tariffs, also starting to compress. >> how many companies have come out and given a dire warning on this? you had alcoa. you had a couple of industrial companies. the transportation companies are knocking it out of the park, csx, granger, some on the industrial side. they are affected by trade and rising input costs come of but somehow they are still beating and guiding upwards for the future. be abouts going to individual companies, individual

stocks. alix: and waiting for the conference call. thanks very much. good to see you. companies are weighing the impact of a stronger dollar. here is what the cfo of johnson and johnson told us after it lowered its forecast for drug revenue. war ats not the trade all. overall, prospects for business going forward are strong. it is simply the macro effects of a stronger dollar. alix: wells fargo head of currency strategy. king dollar was one of her headlines. how much more upside? from the most recent low. that is sizable in the context of a longer down trim it we are closer to the end than the beginning. alix: why? >> one of the things driving the dollar is the rate hike feel. jay powell was upbeat, but more

flexible. we keep watching those signals. alix: we spent so much time yesterday unpacking those two words, for now. jason: what else did you hear from chairman powell they gives you some direction or sense of how he is managing policy at this point? quo, butw, the status data dependent. the u.s. numbers have been good. the bar is five. he will be harder to keep beating from that side of things. they are starting to get closer to the neutral zone. we expect to more hikes this year, but i would not be surprised if we slow down going forward. alix: part of that will do with how strong the u.s. economy is. i'm trying to pull up a chart that looks at the gdp atlanta forecast. there you go.

4.5% is the tracking index for the atlanta fed gdp now. you had paulo talking yesterday that there was no evidence of a recession. >> i don't see any evidence that a recession -- we are not forecasting a recession. i don't really think we see a recession coming. why which you see only 2% upside when it appears the growth outlook for the u.s. is particularly strong over the next 18 months? >> what we have party scene has anticipated that and price that in. 4.5% to 5%casting for the second quarter. we have seen is reflective of that good news. lots more to unpack when it comes to that stronger dollar. the yuan tumbling 201 year low. the central bank showing no sign

of intervention. it is letting the market do its job. this is bloomberg. ♪ ♪

alix: the next fallout from the king dollar rally is the united nations. the china's central bank weakened its fixing beyond the 6.7 level. this is the first time the currency began tumbling in june. now we hear 6.8, even seven. still with us are our guests. your call for dollar-yuan. >> we agree the sentiment is very negative. the chinese currency is trading at a discount to the fixed, the offshore renminbi. the ford markets, not a lot of -- forward markets, not a lot of depreciation priced in. china, stilln

sellers and buyers of the local currency. environment, but not the extreme in ferment we have seen in the past. alix: how much is a broader china economy story. jason: how much is a trade story? certainly the slowing of china and some of the easing is relevant. what is important is to save the weakness of the renminbi against the dollar is a mirror of the strength. the chinese authorities are managing the currency to a basket. are seeing iswe roughly what you would expect given the strengthen the dollar. it has to do with currency policy and monetary policy, and not so much trade. alix: this is showing that is the case. it is clearly a big gap. it seems like we are playing catch-up rather than something more significant.

does that have ripples through other em currencies? >> it does spirit one of the things we are seeing globally is a sharp slump in equities. we have not seen a meaningful recovery. those em currencies will peso,ue to struggle, the the brazilian realloc, the russian ruble. if these trade war's stay with us and market standard pressure, currencies will struggle. the emerging markets story has been uneven so far in 2018. what does this signal for the balance of the year? in terms ofdown to, the whole trade for dynamic, we don't need to see this trade tensions received. we just need to see the escalation stop. the tit-for-tat and the we caning of tariffs, if

stabilize and plateau, markets bem, a and that will more hopeful environment. alix: what is on your shopping list? >> we would like singapore dollar in a more global environment, canadian dollar we quite like. the euro if they get around to raising interest rates. that has long way to go over many years. alix: wait until december 2019. you will be sticking with us. the eu prepares to fight back over car tariffs ahead of the presidents meeting with the european commission president. more on that, next. this is bloomberg. ♪

alix: this is "bloomberg daybreak." futures rolling over a little bit. points.0 it futures off by eight points. dax off by half a percent.

as to venture a guess why, the enormous rally we have dollar.the dollar-yen up by 1/10 of 1%, but the yen is the best performing against the dollar, everybody else hit pretty hard. the ramifications of the stronger dollar echoing all throughout the different markets. yield,or the two-year the highest level on the short end since 2008. commodities a casualty here of the stronger dollar. the complex and in correction. jason, because i have to, i will off by over 2% is part of it is the china slowing story. the other part is the dollar. you could not compete. jason: it is a massive move. you are the commodities expert. alix: there you go. we are watching the rollover in commodities. now an update on what is making headlines. here is first word news. kailey: vladimir putin called

the meeting with president trump a success and he is slamming critics who disagree. he said the summit began a path toward positive changes. he also said some people in the u.s. but their party's interest ahead of the nation. the administration reviewing a plan to curb protections that allow drug makers to offer rebate plans for keeping drug prices high. drugmakers offer the rebates to benefit managers. the pharmaceutical injury -- industry has urged to pass the savings to patients. sterling could be hit hard if there is no brexit deal. a survey says the pound could fall a percent against the dollar if the u.k. does not reach an agreement with the european union by next march. still, analysts say there's only a 20% chance of a no deal brexit. global news, 24 hours a day on air and on tictoc, powered by over 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is bloomberg. thank you.

down in washington today, huge meeting over at the commerce department, as everyone who has any sort of interest in the car business is gathering to talk about what potential tariffs from europe mean. the back-and-forth between europe and the u.s. come i should say. kevin cirilli was in new york yesterday. alix: he was literally wandering around. jason: he was. our chief correspondent joins us. bring us up to speed on what is happening. kevin: at the conch -- commerce department today, every representative from the automakers will be making their case known, that they are against president trump in his administration's proposed 25% tariff on imported auto parts, as well as automobiles. meanwhile, we're monitoring this because there are reports in europe today that they will put tariffs on u.s. coal, chemical and pharma products, if the u.s. goes through with that. in terms of the politics, that signals that the coal industry

as part of the political movement, especially as we get closer to the midterms. fromt to pull up a number the alliance of manufacturers, with the g.m.,, vw, and toyota. an $84 billion increase in they say will be the price that it will go up in your alicia the president come through with tariffs. jason: kevin cirilli, keeping an eye on the car business and all around their. alix: european automakers reporting earnings, and although was one of the first. the ceo calling for zero tariffs on auto markets. here is what he had to say. "we risk of the same consequences as the rest of the industry. it would be negative for the industry and affect the entire economy in the western world." he is like my let's not have tariffs at all. jason: free trade for everyone. alix: joining us is kevin tynan. kevin, what can we realistically

expect in terms of some kind of retaliation? is thei think that threat, the 25%. we are fighting over 2% versus tempers that now you throw out 25% and retaliation, and i think that is about getting the parties to the table and getting closer to, as samuelson said, let's get to 0%, because it will disrupt the growth trajectory of the a lot of companies, including volvo and a subaru, those companies trying to gain market share in the united states. they will be unwound by those tariffs. jason: i want to ask you about this sort of -- how tied together the auto industry is and how global it is. i think about the southeastern united states and how much car manufacturing there is on the part of european carmakers. you look at south carolina, alabama, georgia -- what are the

implications of that and the tariffs all strung together? kevin: you look at the move toward globalization and of those other factors are a result of the chicken tax, where european automakers have to bring their light truck capacity to the netted states to avoid that tax. but their car capacity really is still outside of the united states. and if you look at somebody like, you know, the big three of the year being premium brands, bmw, mercedes and vw with their portion and audie brands, both log and probably has the least -- vw probably has the least amount of capacity, where bmw and mercedes-benz have been shifting their truck capacity here for some time. alix: we have a graphic that shows the german brands, the amount of u.s. sales from 2017 and how much of them are imported. you can see porsche is at the top of the list, and vw at 7.7%.

if you are the parent company, like vw for example, what is the reaction function to potentially higher prices on supply and demand? from that perspective? kevin: part of that is to realize that you are talking about, especially with porsche, the ability to pass the increases on a little bit easier than you would for something like vw, or one of the volume brands, where the margins are very thin. vw moves to a full line manufacturing in the u.s., you can spur that to the consumer a little bit wider than you would in a volume brand. alix: is the demand going to be there? m, it will be at the

higher end of the range. know, but again, some of those companies, especially the vw brand with atlas and pickup trucks and suvs trying to make gains in the united states, and if you increase the cost of those vehicles looking for a, that is where there will be a problem. alix: great stuff. thank you. now, what it all means for the broader markets has been a question we have been asking -- how do you hedge this political risk and how do you hedge these headlines? dollar-yen is not the hedge. take a look at it over the last few weeks, yen has not performed as the safe haven currency of choice. nick, why? nick: technicals have something to do with it. our expert was looking at one of these triangle formations and we are breaking up the top of the

trying though, so there has been thathnically inspired move has not helped and there has been a good run for the dollar, so that has not helped. and as you said before, the yen has been performing well, so not many safe places to go. alix: is there something we can learn about flows in general. nick: i think it is not working as a safe haven right now, but i believe it is the exception that proves the rule. we have looked at north korea, the italian election, where there is china, and in the past japan has been the most consistent safe haven, so i suspect if we continue to get these kinds of tensions eventually that safe haven dynamic will kick back in. jason: we will be interesting, just to bring it back to the cards, the japanese obviously have a vested interest in the car market, the u.s. car market, in terms of manufacturing and in terms of consumer buying power.

iny will be among the groups washington today at the commerce department, so there is an economic angle to this as well for them, i would imagine. nick: there is. and japan has a stronger currency and potentially is a target of tariffs, we do not know, it is not at the top of the list yet, but it will be impactful for the car industry. to be fair, probably not as critical as it was 10-20 years ago, but it is still relevant. alix: i want to get your thoughts on the euro-dollar. talking about the potential auto tariffs, what is priced into the currency pair? in terms of the macro risk. think in the, i position of those tariffs -- that imposition of those tariffs, i do not think there will be much be on that. alix: great to spend time with you. nick bennenbroek from wells fargo securities. speaking of the dollar, i am talking about commodities on my show, but particularly copper

and the rollover we have seen. and copper, is it really about china or the dollar story? jason: i will turn that back on you, because i do not understand it as nearly -- understand it nearly as much as you do. what is it about copper in this market right now? alix: in theory, it is a global growth barometer, so if you are shipping stuff, ability and stuff, you need copper to do it and prices should reflect it. on thehas softened edges, transitioning into a domestic oriented economy. but when you have a big swing on the downside like this, it does trickle back to the pediatrician kind of conversation. i'm trying to make a doctor conversation. jason: you lost me with pediatrician. i was with you until that point. you did a good job explaining, but the pediatrician i did not get. it all comes back to trade. and i think, you look at alco, all these companies coming out

as brooke mentioned earlier, we will be hearing from industrials, so this has to be part of the conversation. alix: we will talk about pork getting hit by trade, a lot more pork here in the u.s., so there is a lot of effects we will cover their of the commodities show. on commodities edge, shameless tease, i will also talk with a ceo about the exploding leg command that comes from -- guess where -- china. jason: coming up, my favorite segment. the wall street beat, we will talk about one of the biggest debates right now, who is winning on the league tables? is it goldman or morgan stanley when it comes to m&a. alix: is everybody? jason: everyone wins. this is bloomberg. ♪

♪ alix: this is "bloomberg daybreak." kailey: coming up, ambassador ambassadorvan -- david o'sullivan. we turn to wall street beat, where we cover three things. first up, mergers and misrepresentations. if you're looking for the top dealmaker, be careful who you ask. and going public, the online education boom has princeton grad eyeing markets. and the courts i correct down, another reason to be disappointed this year, this time it is off the court. them. down on h jason: they deserve it. alix: lisa is here. jason: jumping right in, as it

she tends to do -- as she tends to do. whoa. which is what you might be saying if you ask a banker who is number one in the m&a tables? lisa: local is come i never met a banker who is not number one, but you do have conflicting data. whether it is from geologic or bloomberg or other sources coming out and saying, morgan stanley is number one versus goldman sachs. now, as we talked about yesterday, this goes beyond just who is on top with respect to this data. goldman sachs and morgan stanley are engaged in a heated battle for supremacy in the morgan stanley stands -- seems to be winning. or coding to our data, they are number one. alix: let's be clear, in each of their press releases they both said that they were number one. this is not like they have a -- like we are making fun of it, they both said it. that is what makes it so crazy.

lisa: the point is, this is good marketing for them, to be able to pitch business, right? jason: winning begets winning. if you have a little bit of swagger, if you pitch a ceo in due say i am number one, i will take you public am i will do your deal. whatever it is. blisa: do you think that is endearing, bro? [laughter] i am not sure. jason: maybe not to you, but to a lot of bros it is very endearing. [laughter] i have known some bros in my time. you bring up an interesting point, we are back at a time when morgan stanley and goldman sachs are going at it. this was not the wall street of the last 10 years. this is a little bit of a throwback. jpmorgan in there too, but morgan stanley is reenergized under james gorman. alix: and looking at banking, i was wondering, is a market share

story, who is losing in that? or is it more activity, or is it a bigger pie? lisa: if you ask a banker, they want not say it is a big sandbox and everyone can play, they will say i want a bigger share and that is what is happening. jason: i am taking the other bro out. alix: i second story has to do with a successful princeton graduate, that will put us to shame. is asically a lingo champ company in china that teaches english to chinese students. it is an online education business and it is planning an ipo with a valuation of $2 billion, not too shabby. lisa: i love this story on a couple different levels. the first is, the increasing numbers of ipo's of chinese companies in the u.s. and on the mainland -- it raises the question, putting this company outside, whether these ipos are good investments for u.s. investors because they have not always outperformed. and for them to be raising money

now, are googly at a time when defaults are picking up and at a record pace in china raises interesting questions. put that aside come also interesting is the emphasis on education in china and how much parents are willing to pay for education, contrast that with the u.s. where there is a lot more of an expectation that you will get education free and people will not spend as much for it, it is an interesting thing. alix: you are talking about college, what? lisa: no, not college. i will not go there, but people will spend, you talk about tiger moms or all of those kind of stereotypes in china, but the amount of people will pay for education is tremendous and this is really piggybacking on that. jason: let's get back to the bros. this story -- lisa: he wants to avoid it, because we're looking at colleges. jason: i was on a college visit earlier this week. headline on the bloomberg, the perks that have triggered fines for bgc, this is about the sec

looking over, who according to bloomberg reporting, had the courtside seats as part of his compensation. say, said itould was just tna, not comp. per: they built in 3600 courtside seat for the next as part of his -- nicks as part of his pay package when he joined the company, so that is according pay. if you take a step back, what this shows is the amount of excess that some of these interdealer brokers, these traditionally have been the places where pick your movie kind of, stereotyping wall street. this is what they're pinpointing, the excess, the firms that will pay for the birthday parties, the strippers and alcohol in whatever else. and you know, there is a question of is that model completely outdated, or you can

take clients on a crazy band somewhere and it -- binge somewhere and they will do business with you. are those models disappearing as people try to account better for where their money is going. jason: not surprisingly, las vegas plays into this story. alix: you are talking and i was thinking, what would i want? private jet. jason: i would go with a pj. concert tickets, what do you want? alix: free school? lisa: unlimited facials. [laughter] alix: i do not know. ok, thank you so much. lisa abramowitz. coming up, blackstone and putting more of their dry pattern to work. and if you have a bloomberg onminal, check out gtv your terminal. scroll through and check it out. this is bloomberg. ♪

alix: want to update you on breaking news. philip morris, disappointing with its profit forecast. they caught a conservative and the stock is down over 3%. somebody down by about 1%. they wantat is smokeless devices to get back on track and they are having a harder time doing it, so we will watch that throughout the morning. jason: as alex has been rightfully teasing me about this morning, i'm excited that the blackstone earnings are out. the numbers, we are digging into them, they beat on the profit line, but the aum was a little light, which appears to have investors concerned. for more not, we have stephen gandel. how are you? what did you make of this? stephen: i do not understand the investor concern. if you talk to any pension fund manager these days, what they want is private equity. and the blackstone is in the process of raising a $20 billion

fund, it will be their biggest and it is nothing like they are hurt for cash, yet the market did not like that number. jason: it is interesting to hear what they say on the conference call, and as you know, the numbers come out and people parse through them, but what are want to hear is -- what these guys going to say about the opportunity out there? $10 billion they are putting towards direct lending. what are the drivers here for you? stephen: i think the thing that they will be worried about is something that jonathan gray said yesterday, that he is worried about tariffs, worried about the trade war with china. he said, if we do more of this we will be raising the cost of capital in the u.s. and it is a big deal, that could be what is moving the stock more than the little bit light on aum. alix: is it also, is any of it competition? there has been so much money raised in other firms, so how does that play into it? stephen: that is the flipside. they are the hot asset, but the

other side is the drive pattern. which, it did go down a little bit, they put some money to work. but at the conference where that was a question, don't you guys have too much cash. a lot of guys said, we could never have too much cash. that sounds like bubble. jason: you raise an interesting point about the drive pattern, because they are putting a lot of money to work, but a question investors will ask is how much of a pain for the deals, because more money leads to more competition, so if they are getting into these situations on the corporate side, valuations being what they are, they may be paying high prices for these deals. stephen: and with interest rates going up, it will raise costs and will be harder to make those returns. jason: people count on private equity, the reason it is so attractive is because they get multiples on their money. they get this was of returns they cannot get anywhere else. alix: to that point, we know that blackstone is going with a different kind of product to appeal to different customers,

especially on a lower end base. where are they in that transition? stephen: they are doing more than -- more with their lending fund, gso, that is a direct lending product. they will do better as interest-rate go up. they will be able to get more for that. they are try to broaden out to a lower investment class. or a lower type of investor. but, you know, there is so much demand from the pension funds that they do not need to widen out too much. jason: notable that the new president is a baller in real estate. alix: there you go. stephen gandel, thank you. riley of fbr.an this is bloomberg. ♪

alix: keane dollar. the u.n. hits a one year low and

commodities sink into a correction and the two-year yield hits a 10 year high. a certificate headwind, alcoa hitting profit forecasts and canadian production hit by tariffs. the trade affects our triple their earnings. more than 40 people go to the, department for a public hearing on auto tariffs. eu standing by to retaliate. happy thursday. it is friday eve. good job. i'm alix steel. jason kelly joins me now. it has been an interesting week, where i feel like the move has been the dollar and not a lot of other stuff, but headlines are coming fast and furious. jason: every headline, if it is not about currencies, it is somehow about trade. even as we see all the earnings come through, the undercurrent in every conversation is about trade and tariffs. and what that is going to mean for companies. alix: even if the numbers are solid. union pacific beating on

earnings, as well as revenue, and their ratio at 63%, but we want to know about the visibility of going forward and what kind of demand will come through for the back half of the year as prices rise, as tariffs might kick in, that will be the broader question. in the market, equities rolling over just a touch. s&p futures are down by seven or eight points. dollar index, that is the mover of the week. up for tenths of 1%. ripple effects felt through the asset classes, and the two-ten spread. the two-year yield is sitting at a ties level since 2008. and all across the board, commodities are getting whacked . crude sitting on the 100 day moving average. jason: yesterday, we had the same conversation about markets humming along, but commodities, which you love, you have a whole show about a coming up, commodities edge -- tune in. commodities are getting whacked

right now, as you say, so a lot to discuss. and starting to filter through the earnings. we will hear more commentary on that later on. alix: a lot coming up. jason: absolutely. let's turn to the morning brief. coming up at 8:30 a.m., auto hearings starting to happen in washington at the commerce department. 40 executives, workers and ambassadors all gathering around to talk about with the tariffs may mean. earnings coming up after the bell, microsoft -- we will dig into that. and capital one. and the gulf, as they call it come over in europe. the open championship in scotland. i do not think a pronounced that right. they just call it the open. not the british open. over there, is just the alix: fell asleep while you are talking about that. one week in earnings season, executives away in an on the effect of tariffs.

>> we are reducing our outlook to reflect recent prices. tariffs on aluminum imports, increased -- and operational impact. >> as we start entering this conversation about trade and tariffs, we are seeing clients pull back a little bit. there waiting to see how it plays out. >> the trade stuff is a negative. it will hurt sentiment. it is not through -- it is not thought through. >> we are worried about trade. our aerospace business thrives on open trade. >> we are not a company that sells in one country, produces in another. but, yeah, raw materials have to go across the world and oil prices fluctuate. do with these restrictions when you cross boundaries. >> it is not a true but it to the trade war. over all, prospects going

forward are strong, it is simply the macro effect of a stronger dollar. alix: joining us is art hogan. art, what do you do when the actual numbers for the most but hecome in solid, will have exposure to trade headlines? art: that is one of the biggest concerns we have during this earnings season. the set up is very good, the expectations are right where they should be a 20%, earnings growth, and our big concern is what we hear about guidance. we have heard this through the first week, that the first concerns are the stronger dollar and how it is adversely affecting margins. and with the currency translation. and the unknown, the fear trade policy and how it will adversely affect things. obviously, started to feel it in the aluminum companies. we heard that. and the guidance is as important as you report card, and it will

affect how things trade. to the extent you have to do three things. you have to be your number on the top and bottom line, but also some kind of upbeat guidance, that will be difficult for its ago was to do with the unknown of trade and how it affects their business, their supply chains. i think it will keep a damper on the markets as we work through earnings season, because of the fact it is difficult to have really good clarity into the second half of this year. jason: it is an interesting point, because we were talking about how investors seem to be punishing companies more this quarter for missing their numbers, even more than they were in the first quarter. are investors just more nervous, generally? is that about specific companies, or is it about the macro environment that you were talking about? art: well, valuations look pretty reasonable coming into this. the punishment has more to do with uncertainty going forward. really unclear where the exit ramp is on this trade policy and

whether this cold war in trade is actually going to turn into a full-blown long, drawn out mutually destructive trade war. therefore come i think investors are on the edge of their seats, and taking their lead from guidance they are getting from corporate executives that have to say, listen, profit margins are coming down, guidance may come down too. this may be the first time in the last three quarters where estimates come down for the next couple quarters. or at least do not go up, after beating, and we saw that with american express this morning. so that is where the punishment is going to come. if you keep guidance the same after second quarter beat, the outlook does not look good. alix: great point. we heard the bubbling up in the fed yesterday about other concerns in terms of pricing. manufacturers expressed concerns about tariffs, district search reported higher prices and supply disruption that they

educated to the new trade policies." my question is, if you get those headlines and get their earnings warnings, you want to go on the defensive with the consumer staples. those have been up over 3%. but those stocks are very much exposed to higher tariffs, to run material costs, as well as the consumer not been able to handle the price increases. where do you go is an investor? art: i think that sense of rotation is dangerous. if you look at consumer staples, they are growing at 10%-12%, and i think that is still in reasonable. they were the dividend or lanes of the last two or three years -- darlings of the last two or three years. and i think that with that is the backdrop, a defensive rotation probably should be short-lived. i think you better vucevic about this is the thing about small mid-cap, domestically focused, less impacted by trade, so like the s&p 500 and the dow.

we have seen that before, with the russell 2000 up 10% to date. i jason: think that will continue and broader now. we've heard from jay powell up on capitol hill this week and tuesday it was all about "for now." his policy speak there. yesterday, you talk about whether a recession was looming. >> i do not see any evidence that a recession is imminent. we are not forecasting a recession. and so, i do not really think we see a recession coming. jason: that seems pretty firm. what do you think about a recession? art: it depends on what you look at. if you look at the leading indicators, they are showing expansion and i think it is a positive. it is hard to get a recession with expansion leading the economic indicators. the concern i would have is the shift of the yield curve, that is dangerously flat. that is a very good predictor, for a recession.

it has held pretty true for the last nine we have had. we have data originate -- have divergent views on that right now. we do not know the extent to which trade policy disrupts economic activity. if you do not know what the input costs will look like, you may hold back on capital expenditures, so that could act g put intot even bein place, they can hold up business decisions and slow the economy and something that could drive us into a recession. i certainly think that unless we find some sort of negotiation and stop this ongoing tit-for-tat trade policy, you probably will have more of that cautious commentary out of the executives and you will certainly have -- that would have otherwise been held back. jason: caution seems to be one of the words of the day. art hogan, you will stick with us. we will see you on the other side of the break. coming up, ambassador david

o'sullivan, the european union ambassador to the yes, among those speaking today at the commerce department. we will see what his case is around the tariffs. this is bloomberg. ♪

kailey: this is "bloomberg daybreak." investors are worried the online marketplace ebay is losing momentum. the company give a lackluster sales forecast for the third quarter and lowered its revenue forecast for the year. ebay is trying to find its place in the shadow of amazon. and brick and mortar retailers are improving their own online options. blackstone group making a dent in its war chest of cash.

the largest alternative asset manager invested more of the money sitting on the sidelines in the second quarter. blackstone still has $88 billion of so-called dry powder left. the economic net income beat estimates. it features realized and unrealized investment gain. s&p's that on the cloud business is paying off. the software giant raised its outlook for this year and next, as they cited accelerating cloud sales. the covenant says the new cloud -- been growing faster than has been growing faster this quarter than in the first. jason: big meeting come as we've been talking about, down in washington today at the commerce department. all about tariffs and the automobile industry. joining us from washington is ambassador david o'sullivan, he is the eu ambassador to the united states. thank you so much for being with us. looking forward to hearing what you have to say later today. give us the pitch that you are

going to make when you testify there at the commerce department. ambassador o'sullivan: good morning. thank you for the opportunity. we will be saying that in our view there is absolutely no justification underground of national security for contemplating imposing tariffs on auto and auto part imports. think, undere, i no circumstances can you argue that this poses a threat to national security. economically, we think that the auto industry is actually in good shape. and do not pose a major threat. the consumer -- they contributed consumer choice. european company's are heavily invested here, creating hundreds of thousands of jobs. and finally, this would be a massive escalation of a looming trade conflict, as you saw in your earlier reports. this would do with may be as much as $300 billion in trade. if there is retaliation, a serious escalation of existing trade conflict, which would be to nobody's benefit and to the

detriment of us all. jason: one of the things you point out, which i find so interesting is that over the past few years we have seen a shift in the u.s. in terms of manufacturing, especially with european cars in the southeastern united states -- with alabama, georgia, south carolina. we are talking about a significant number of jobs. what is the risk there if the tariffs go forward? ambassador o'sullivan: i think these investments create about 100 point thousand jobs directly, maybe as much as 420,000 jobs in the dealerships and downstream industry. they do enormous amount for the workforce in those regions, because these are highly skilled jobs and people are trained on-the-job to acquire those skills. the risk is, if you have an increase in tariffs on parts and cars, it disrupts the whole supply chain. as some of the commentators said earlier, those companies rely on

parts which come from different parts of the world, they are assembled here then exported from the u.s.,. including back to europe the minute you put tariffs on cars or car parts, you will have a massive disruption of the supply chain and it could seriously disrupt the production of these investments in the united states, as well as imports. alix: nevertheless, the u.s. charges 2.5% on tariffs -- of tariffs on cars imported. on a number to number basis, they are not equal with europe. so knowing president trump, that he will probably not be backing down, what can the eu offer? ambassador o'sullivan: you are correct, percent caps off cars in europe the tariff is 10%. for other types of cars, which are an important segment of the u.s. market, suvs and light trucks, the tariffs here are 25% and much lower in europe. isolating one tariff line does

not give you a true picture, but having said that we are more than willing to sit down with the administration, figure out where the problems are, and how can we find constructive ways of going forward, including the possibility of reducing or eliminating tariffs on industrial products. this was something we were negotiating with the previous administration. the important thing is not to do this in a climate of hostility. and to be clear about the reciprocity and mutual benefit of any arrangement we enter into. alix: having spoken to you european -- to european car companies and do get a sense of -- with the demand dynamic, if we get the tariffs going for, how quickly it will affect production and sales? what is your read through? ambassador o'sullivan: i think it is difficult to predict with precision how this will play out. it will certainly increase the cost of cars to consumers, that will affect dealerships. it will affect the car parts, therefore that will affect the

assembly industry. i think there will be generally a slowdown in the car market. including, by the way, for domestic manufacturers who are equally concerned about this. an important point, nobody in the american industry is asking for these tariffs or thinks they would be a good idea. i will be testifying today, but look at the long list of other american domestic interests who will be testifying, also asking the minister said not take this step. -- asking the administration not to take this step. jason: i cannot help of the asking, just a week ago the president was in europe and the u.k. before on to helsinki -- what is the state of the eu-u.s. relationship at that level coming out of those meetings last week? ambassador o'sullivan: we understand president trump has been elected on a platform of feeling that the set of international relations, which the u.s. had, do not always work

in u.s. interest. we are friends of the united states and we are willing to have an honest discussion about how we can do that. lastly, there was discussion about defense expenditure in nato, and we will be talking about the trade relations next week, so we understand president trump has a different view of the world than previous administrations, but we believe the partnership with the u.s. and european union, economic and security, is a vital to the interests of but of us in way of every interest in finding solutions. jason: obviously, you have your hands full here in the united states, but a lot of your colleagues back home are dealing with brexit on nearly a daily basis, i would imagine. obviously, there was movement over the past week with prime minister may and decisions she has been having to make and negotiations with her parliament. what is the next step in your mind in the brexit negotiation? ambassador o'sullivan: we heard the chief negotiator here in

washington last week, he was very clear that the european commission will study effectively the new british proposals in the white paper. the most important thing is to agree and finalize the agreement, the withdrawal agreement, the terms of the divorce. we're nearly there. 80% is agreed. the most difficult issue remains the irish border issue, and also in annex to that, there will be an outline of what the future relationship between the u.k. and eu will look like after the u.k. leaves. those negotiations begin with the u.k. leaves at the end of march next year. the most important step is to finalize the withdrawal agreement. we have to do this in the autumn, because it requires months for ratification. there isis short, but a clear determination to try to get to a fair deal in the early autumn. alix: to wrap it up, as a go to

the commerce department what is your timeline, how quickly do you expect something to come through or not, and how quickly will the reaction time from the europeans be? ambassador o'sullivan: we hope that out of the discussions today, the written submissions that we have made, that the administration will realize this is not a good idea and that the report will show clearly the downsides of any action on auto tariffs. if the ministration were to move, we are making our own preparations for rebalancing measures in response to anything the u.s. would do and we will be able to respond quickly, if needed. we really hope that is not where we end up. i think it would be to the detriment of both the united states and european union. alix: david o'sullivan, thank you for your time and good luck. in the markets, technology investors looking for microsoft results after the bell today. revenue estimates at $29.22 billion. it will be about the broader effect that microsoft is off by

3/10 of 1% after hitting a record high earlier this week. joining us from his office is john the 15th, the managing director for equity research, with an underperform rating on microsoft. you are the most bearish. us, as is still with well. why so glum on microsoft? what are you looking for this quarter? >> for the quarter, we are not glum. we believe there is risk in microsoft stock that is not accounted for in the stock, but for this quarter we think that you should see a pretty good quarter, especially because you just saw the numbers come out, the pc shipments, which grew for the first time in six years. the microsoft windows business, historically it has tracked closely to pc shipments, and it has actually outperformed in the last 2.5 years, but prior to that it did track really closely. yout outperforms again,

could see really good bottom line results that of microsoft. think,dows accounts, we more than a third of profit for the economy. so we are not looking for a glum results today. alix: but going forward, what are the headwinds? in the short term, it seems like it is competition as well as the stronger dollar, so walk me through why you are the most bearish on the street? >> there are three tenants to her negative call. the first is pc shipments. a lot of industry analysts have looked for this to improve over time. we saw this as a secular challenge, a secularly challenged market. and windows is tied to that, or it has been. and it is a big part of the profit of microsoft, so we saw that is one challenge. the second reason has to do with azure. the thing that people love about microsoft. it is going to grow, cloud is going to grow, we are not negative on that.

it is good for everybody, good for customers, good for the vendors. ande is some risk here, that is because in the on premise world for the small to medium business they are the dominant vendor, for infrastructure software, so as you move to the cloud there is competition. it is not just microsoft. there is aws, google cloud platform, others. microsoft goes from a domination to competition. by the way, aws is the leader and they can be and probably will continue to be less price sensitive. you are going to see margin impact to microsoft over time. people look at azure and they say it is just like aws, and it will grow just like it, it will have similar margins, and we think there is a high risk that does not happen, that the margins are much lower for azure than people realize.

that will play out over years. unfortunate, it has not worked well for the stock. for our stock called. -- call. jason: give us perspective on the broader landscape that john has talked about two the length of microsoft, but also -- about through the lens of microsoft, but also about the tech world into where plays into your overall strategy? art: when you look at the performance of the market, there are two things that have been driving things this year, and technology is one of them, especially disruptive technology like the faang stocks. the leadership is technology and it has gone less broad. the other leadership is small and mid-cap, russell 2000, those domestic names. away from that, the market has had rapid sector rotation. as we look forward, i think that technology continues to be leadership this year, as was small and mid-cap. facebook, you have

amazon, google and microsoft, all hitting record highs this week, so how much more upside do you expect in the shorter term? art: these are companies that continue to grow revenues and earnings at an amazing pace. you look at the valuations in a company like google, i think that the runway is pretty clear, even through the back cap of this year and into next year. -- half of this year and into next year. alix: coming up, economic data. the business outlook survey will be out in a few moments, what does it say about the dangers ahead for the u.s. economy and more and private -- and more importantly, price input. this is bloomberg. ♪ two, down and back up.

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across the board, ripley through the bond market and commodity market. dollar index around the highs of the session, 95.58. and to your yield at its highest level -- two year yield its highest level since 2008. jobless claims coming in at 200-7000 initial jobless claims, that is lower than estimates. right in mind with what we continue to see in the market. that stronger market, as jobless claims fall by a 2000. 8000. 25.7 is the philadelphia fed business outlook. i wanted to point that out because if you look at the details of it come of the employment index coming in light, the new orders coming in strong, prices paid coming in really strong, prices received really strong. i love the indexes, because i feel like you are able to dissect the regions, as well as

the input. jason: we are all about the inputs this week, and everything like the bespoke yesterday, distilling that down command we love our superlatives here at bloomberg. i know that the trump administration likes to touts these headlines. the jobless claims at the lowest levels since december 1969. that is an amazing statistic. so, right now it will be interesting to see how the market reacts to these numbers, which clearly seem strong. alix: 100% of the dollar index on the highs of the session on that. still with us is art hogan. how to structure a portfolio on the data we are seeing in the u.s., where everywhere else is moshe, where you have to still be mindful of the macro risk. art: when we started in 2018, we

had the assumption that we would --e sigrid eyes economic synchronized economic global growth, and when we look at the first quarter this year and certainly into the second quarter, we started to see a soft patch and european data for a lot of reasons. and a slowdown in china. clearly, the u.s. is the strong list -- strongest developed country right now. as we look over the last two weeks, with the improvements with manufacturing and ism's, what to be concerned about, andher that will peak out it does not feel like it will peter out anytime in 2018. it looks like the u.s. will be the driver of the global economy for the time being. alix: you can see that reflected in the u.s. dollar into what is happening in the yield curve as well, with the two-year yield at its highest level since 2008. and commodities sinking into a

correction, sliding into the face of the stock -- stronger dollar. copper with its worst weekly selloff since 2015. injured cause growth, senior analyst of commodities, we briefly with a below $6,000 on copper, so how sustainable is the downtrend? >> i think it is feeding on itself. the last time we spoke, we had mentioned that the yuan and a dollar with him as the board things to watch. china saying it will not defend yuan. again, that is the driving force here. the trend is your friend and it is down at the moment, and we are still looking for signs that we're going to see stabilization. -- spiking to levels that normally indicate turn, but again those things take more

time to play out. alix: citi said that copper is a buy on the debt, it is more of a technical issue, not a long-term issue, that supply and demand is pretty good. brady you stand on that? andrew: we published our outlook on copper a couple of months ago. this year, we see the market somewhat oversupplied. for the next two or three years, the copper market more or less will bounce. 2022, itok at 2021 and is hard to figure out where the new supply is going to come from, especially when you have price down to where it is right now, we think it needs to be near $7,000 to incentivize more to come online. alix: thank you very much. art, back to you. what do you do with industrial material equities? we seem to have lost art. and it is not just commodities over all, it is also oil. come inside the bloomberg. this is the brent oil move we

have seen over the last couple weeks. we have not seen these kinds of selloffs since 2011, 2015. it has been a standout. joining us is michael tran. mike, you just today tour in the u.s. and canada. how worried are investors worried on the selloff we have seen? mike: it has been a pretty sizable selloff over the past sessions. investorsselloffs go, are not as concerned about this move. why? this is probably the healthiest kind of selloff that you can actually get. what i mean by that is, you have not seen a significant amount of short-sellers pounding the market lower. instead, you see a lot of light liquidation and crystallization of profits, because oil markets have had a good run over the past several weeks, or months. from that angle, one of the key things is a lot of investors look at the oil market, i have made some money here and i want

to potentially take some off, because i do not want to wake up to a trump tweet, for you see prices down, i do not want to tradep to spr news or escalation where the prices will be down 2% or 3%. the fundamental view of the market is quite bullish. jason: when you were out and about, everybody was talking about -- alix: all of the oil sitting, that we wait to release, you have to keep a certain amount. mike: there is an increasing likelihood that we will see a release at some point between now and midterm elections. if you get a release, certainly it will be a bearish headline and he will get a knee-jerk reaction lower, but what is important is that asked that question of how effective is this forgetting gasoline and diesel prices lower -- that is what the goal of donald trump is. you take a barrel out of spr, it could go one of three ways, you could go to commercial storage,

a refiner, or be indirectly exported. alix: i will pause for one second, because we are getting breaking news on comcast. so comcast is not planning to pursue further purchase of fox assets. again, comcast is not intended to pursue twitter for century fox assets. i feel like it is a cave the bob iger. jason: where is david westin when we need him? alix: i said, you will know this news is going to break when you are gone. [laughter] jason: i was witness to that. this is a big deal. pun intended, in the sense that this has been the most watched m&a transaction, or potential transaction, around this entire year. disney, comcast and fox all intertwined. alix: comcast will stay focused on a recommended offer for sky. ofwe know, fox on the part

sky, comcast is interested in acquiring sky. and if disney gets fox, that would create an asset that would then be somewhat owned by comcast, if comcast actually won sky. jason: that was amazing. alix: did you follow that? jason: i was trying to draw it in my mind as you said that. alix: comcast stock is also up in free-market. there was a lot of conversation on this, that comcast did not have the balance sheet like disney did. and the other part of the story was comcast was ultimately trying to dig up the price, rays of the price to put the screws to bob iger a little bit. mike: this is obviously a distribution play, but also the content play. i think back to earlier in the week when we had results out of netflix, netflix plays into this, amazon plays into this. it is a new world of media companies, as well. it will be interesting to see,

because we have the early market reaction, and it will be interesting to see how the commentary comes out. whether disney says anything on the record, or whether they talk to people behind the scenes. alix: to recap, brian roberts jumps out. comcast will not be pursuing for the purchase of fox assets. fox stock falling 1% in the market over in the u k, as comcast gains as much as 1.5%. disney stocks pretty flat at the end of the day. paul, why? why now they brian roberts say i am out? paul: it became clear that it would be much of a challenge for comcast to go after both 21st century fox and sky, that would be a big stretch for the comcast balance sheet. at the end of the day, saner heads probably prevailed and comcast had to look long and

hard other strategic focus and probably said, if we can get one of these which one would we want. sky is something that fits better with of them, that it gives them international exposure, which they need, and it is a business they understand. it is distribution, it is content. this opens the way for disney to go in little bit more aggressively for the 21st century fox assets. so it could be a case of two big companies kind of carving of the assets and focusing on what is important. alix: what we also learned is comcast will stay focused on the recommended offer for sky. so walk us through a situation where comcast wins its bid for sky, and disney gets fox -- what does that look like for a bottom provider -- from bob iger? paul: he may be a minority owner and keep his mind on ownership, and sky for the acquisition of fox, the question is will disney as the minority owner of sky

want to be a minority owner on it? i think they would sell to comcast and use the proceeds for something else. the question is, what does disney want to do with sky? are they going to let it go to comcast, or do they come back and we still have a bidding war for sky? jason: i want to bring back art in here. what do you make of this latest twist in this twisty and turny sauget in the media landscape? art: comcast is doing the right thing, they want sky more than they want fox. i think if disney did not have a big interest in sky, it would be something they would offload anyway. disney wants the content and they will get that. and it will help with their on-demand product coming out in 2020. they want more content for that

and they are going directly after netflix and amazon with this product. they get what they need, they get to offload what they need to a willing buyer in comcast, so it probably plays to everybody's benefit and probably the best case scenario. jason: paul, what is the knock on effect for further consolidation or m&a in the media landscape, now that this one seems to be getting result of it? >> i think we will see more m&a in the media landscape. if we have seen anything here from comcast and a disney, it is a signal that they recognize to be competitive, as global technology companies such as netflix, google, facebook and amazon, you need global scale. with comcast, i know i did not get a lot of the 21st century fox assets, i will look to bulk up more. they may look at companies like discovery communications, which would give them content and international exposure.

they make it more global assets. m&a we think we will see morem&a through out the summer -- we think we will see more m&a throughout the summer and throughout the year in the media space. alix: when you said that there would be a bidding war for sky, what does that mean, like how high could we get and how competitive will it get? paul: i think that most shareholders of disney and comcast would like to see disney walk away from the sky, and take the 21st century fox assets, which i agree with art, those are probably the better aligned with disney. you never know with the bob iger. he said all along that sky is the crown jewel and he may not want to walk away, even though it may be the more logical play. we have kind of said, if you could get up to 18 pounds for sky, in the research we have done before the numbers get ugly for the potential buyer at that point in terms of dilution. there is some upside here, but i

think we will see a play out here. jason: art, bring you back in here. paul mentioned the technology companies playing into this, netflix, amazon, as well as the traditional media companies. how do you see that landscape sold of seemingly start to emerge together, and how do you think of it as an investor? art: i agree with paul. i think there will be a lot of m&a activity in the media space. and one name he did not mention about being an acquirer of content would be apple. their next move will be an acquirer of content and we will hear a deal there. so through another player in the mix along with facebook and google and the rest of the space. and what is king is content. if you have distribution, we saw it with at&t and time warner, if you have distribution you need content and have the entire bundle as we move further to that combination of fully

integrated this tradition of content. apple is the next player we will hear from. alix: let's recap. comcast will not pursue a for the purchase of fox assets. brian roberts versus bob iger, it seems like brian roberts has backed out of that and when not pursue the fox assets. continue their ad for sky, about 74 pence share when you look at their bid. the question becomes what bob iger does first guy and what it means for the broader landscape. joining us is professor gordon. i totally called it, david was on vacation and the news broke, so i win. what is your take? erik: it was running out of balance sheet. sky would not be a bad consolation prize. comcast does not have european or international exposure and sky would give them that. this could be one where

everybody comes out better and there is none of this -- where everybody overpaid. jason: paul sweeney mentioned that it could unlock m&a in the media landscape. what do you make of that and who is interested? erik: everything is for sale at the right price. we will see big rearrangements. putting content just are patient is big. we have seen viacom and cbs together, then split up, maybe they will get back together. sheri wants to do it. we will see. but the content you distribution is going to be reassembled to the extent that the anti-competitive people will let it happen. alix: the comcast ceo said in a statement, "i would like to congratulate bob iger and command those at fox -- commend those at fox for creating such a - -com- company."

jason: you bring up a point about the regulatory area, because it is an unknown with this administration. what do you think happens there? erik: who knows. we possibly have t-mobile and sprint, maybe not. antitrust law may be behind the times. the theory in which the government so far has lost with at&t case, it may not be sufficient to protect the public. on the other hand, the change in technology, the way that we watch things, maybe the rearrangement should be allowed. maybe it will be better for consumers. alix: i asked this caution of paul sweeney -- why now? why is today the day that brian roberts throws in the towel? erik: probably because, this is speculation, it could be trouble getting financing. and understanding of that all he will do is lose anyway.

get out and try to do this guy deal, possibly -- the sky deal, possibly. he is a realist. alix: part of the rhetoric was he had a lot of ego and it would be this tightetan clash, and eir of them would not want to let it go no matter how much it ended up costing. does that mean that roberts will come back more aggressive? erik: i think you will show that he can make some big deals. he is going to win some. he will say, this is a victory for comcast, we did not destroy value by over bidding, but i think you will be highly motivated to show that he can close a big deal. jason: art, one of the things erik brings up is that everything is for sale, at a certain price, and yet valuations seem to have crept up a bit. how worried are you about

valuations and the potential for m&a therein? art: that is a good question. valuations are bid up because of the m&a activity. everybody knows content is for sale and desirable, so most of the providers that looked reasonable 12 months ago are starting to look expensive. i think that is why comcast had to walk away, because it was getting too expensive, they were using too much of their balance sheet to get that done, so that is going to be one of the questions. i do not think it will be a limiting factor now, but the pricing of acquisitions will be a bit more rational as we move forward because of the fact that most of the content assets have been bid up. jason: netflix endings earlier this week disappointed some folks, largely because they are not adding subscribers as much as they were. at the pace that they were. is there room for other folks? does the flex actually become a

more viable acquirer, i cannot imagine that they would be acquired, but how do they fit into this? paul: netflix has over 130 million subscribers globally and an $8 billion programming budget, so they are the dominant leader in streaming and in streaming and that is where media consumption is going, but that is not to say that there is not room for more competitors and netflix itself kind of concedes to that. that is the number one strategy behind bob iger's moved to 21st century fox. he is ready to go against the netflix of the world, with disney in 2020, but in order to do that he needs even more content. and that brings them to rupert murdoch and tony for century fox. alix: if you're just joining us, here is the news. comcast saying that the company will not plan to pursue the acquisition of 21st century fox assets, but will focus on the recommended offer for sky, which

is 14 pounds, 75 pence per share. "i ceo brian roberts said, would like to congratulate bob iger and a disney and commend the murdoch family and fox for creating such a desirable and respected company." remember on june 20, fox's board said it would prefer to stick with disney's offer for its entertainment assets, as disney raised the bid to $38 per share. it has been the saga of bob iger versus roberts, with roberts now backing out and bob iger free to follow up on the bid for fox. still with us, art hogan, paul sweeney and erik gordon of the university of michigan. what happens now? what is the next step? paul: for the board of 20 for century fox to meet on july 27 further -- for their vote on the disney deal.

so, that deal looks like it will go through. the next steps will be to see how will this kind to play out. will disney come back for another look at sky, or concede to comcast. i suspect it will be the latter. then the deals can move to closure. and everybody else, they just got back from sun valley where they were all talking deals, and i think everybody will come back and strategize about what is the next step. redstoneiacom, sherry has to figure out what she wants to do. and others have to look at what is on the landscape, including john malone, you'd figure out next steps. i think we will see more dealmaking as the media industry tries to reposition itself against these tech companies. alix: that is when it happened, when they met on the sidelines. jason: there is always something. alix: they hid in the closet and talked about it. jason: sun valley. i bet you wish there was

another sun valley next week, so they could to the next round of deals. erik, i have to think that everybody on wall street is -- they will make a lot of money on this, but they have to be salivating on what we have been talking about, which is more deals to come. this is a great time to be an investment banker. out invery banker was sun valley buying craft beers for people. [laughter] alix: they were doing that weeks ago. erik: it goes in waves. for my students, this is where they want to do. alix: what is going forward, with the regulatory issues that we need to pay attention to? erik: they are coming up on the antitrust side, but if you have exposure to the fcc, they can throw up roadblocks and sinclair broadcasting is apparently going to do stuff with television stations to try to get through the fcc. these mergers, these are the

so-called vertical mergers, and they pose more difficult questions and more difficulty for the government, but they can be won. i think the government is going to continue to oppose even the vertical mergers that concentrating a lot of power in one company. alix: paul, so that is where the story is when it comes to disney and fox. walk us through what will happen with sky assets, what happens next? paul: the highest bid on the table is the comcast bid, in which the sky board has endorsed, because it is the highest on the table. and comcast has regulatory go-ahead in the u.k. to move forward on that deal. so assuming there is no other counter bid from disney or anybody else, i think that comcast is in a great position to move forward and close the deal.

so going to the regular closing issues with the various boards and so on, but they have the capital lined up and they are ready to go. alix: also joining us is matt, also from bloomberg intelligence. what is your take away and what does it mean for sky? matt: comcast is in a great position with of their offer for sky, which has been recommended by independent directors, so unless disney and fox really, really want the sky as that and come back with a higher offer, comcast is in the driving seat. the european investors have been encouraging a bit of a bidding war, but we will have to see where it goes from here. jason: do you expect that there will be more dealmaking from your perspective? that seems to be the consensus around the table here, be on the beyondut there now -- the deals other now what seems attractive from your vantage

point? matt: there is a lot of activity right now in the media space in europe. on the telco side, it is more about preparation for 5g and getting these infrastructures in place. bring in the fixed and mobile assets together. and you also see consolidation in the content side, they are trying to prep and defend against netflix and have skill to develop content. alix: thank you, matt. as well as paul sweeney, art hogan, and erik gordon. comcast going out of the foxtail -- pulling out of the fox deal. this is bloomberg. ♪

jon: from new york city for our viewers worldwide, i am jonathan ferro. this is the countdown to the open. ♪

currencyng up, china's slumping to a one year low, the central bank showing little sign of stepping in. trade is pushing below. playing the trade blame game, lowering on significant headwinds. future is looking like this, down nine points, up by one third of 1%. the dollar showing strength. and atllar down treasuries are stable with yields at 287. we begin the program and united states with the top story, comcast surrendering to disney. let's could the taylor riggs. longer comcast is no going to compete with disney for the big chunk of the 21st century fox entertainment assets. comcast will focus on winning control of the pay tv